Queen Mary and Westfield College Bill (

Oral Answers to Questions

TREASURY

Government Expenditure

1. Mr. Viggers: To ask the Chancellor of the Exchequer if he will
give the amount of identifiable Government expenditure per head for each of
the four constituent parts of the United Kingdom.

The Chancellor of the Exchequer (Mr. Kenneth Clarke): Identifiable
Government expenditure per head in 1993-94 was £3,458 in England,
£3, 913 in Wales, £4,185 in Scotland and £4,781 in Northern
Ireland.

Mr. Viggers: Although we English are happy, in present
circumstances, to support the Scots--indeed, I even married one--does my
right hon. and learned Friend agree that the substantial subsidy for the
Scots and others might be different if there were a tax-raising Parliament
in Scotland? Does he agree that the Scots may face the double jeopardy of a
Scottish tax from Edinburgh and reluctance from London to pay the present
20 per cent. subsidy to Scotland?

Mr. Clarke: As my hon. Friend says, Scotland receives a considerable
subsidy from England, but that is based on the Government's judgment of
needs in the various countries, and we judge that to be the correct level
of spending. My hon. Friend is certainly right that it is proposed that the
Scots should have a Parliament with the ability to raise 3p in the £1
on income tax. Why one should be taxed more heavily for working in Scotland
than for working in England, I am not sure; nor am I sure what advantage it
would bring to the Scots. The English

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taxpayer might ask why, if the Scots have
3p in the £1 to spare, he should continue to shift so much money north
of the border.

Dr. Bray: Do those figures include mortgage interest relief, defence
procurement expenditure, transport subsidies and similar matters that are
directly budgeted for as Government expenditure?

Mr. Clarke: As the hon. Gentleman knows, that is identifiable
Government expenditure, but the aspects of expenditure that he describes
are all for the benefit of the United Kingdom. We are talking about
identifiable Government expenditure on public services. The hon. Gentleman
will have heard the warning from my hon. Friend the Member for Gosport (Mr.
Viggers): that there is a risk that the Scots will have an extra 3p
increase on their income tax, which would have a very damaging effect on
living standards for the average inhabitant of Scotland.

Sir Wyn Roberts: Will my right hon. and learned Friend consider
updating the Welsh and Scottish budgets that were published in the early
1970s, which gave attributable revenue as well as expenditure in Scotland
and Wales and which showed clearly, irrespective of any additional taxation
that might be imposed by a Scottish or Welsh assembly, an adverse balance
in expenditure?

Mr. Clarke: I shall certainly consider the possibility of doing so.
As my right hon. Friend says, there is an adverse balance. Scotland
receives more by way of expenditure than it pays in taxation, but that is
entirely right if a United Kingdom Government and a United Kingdom
Parliament decide that it reflects the needs of the population in certain
areas. I cannot understand why it is proposed by some that if one works in
Scotland one should pay 3p in the £1 more in income tax than if one
does the same job in England. I can only imagine that that is likely to be
damaging to the Scottish economy.

Mr. Ieuan Wyn Jones: Will the Chancellor remind the right hon.
Member for Conwy (Sir W. Roberts) that the big difference between 1971 and
now is that we are members of the European Union and that there have been
great changes? As someone who favours European integration, he will know
that the small nations and regions of Europe that have developed in the
past 20 years have been those such as Catalonia, which is now seen as one
of the driving forces of changing performances in Europe. Why does he not
recognise that the people of Wales and Scotland should be given the same
opportunity for the same constitutional arrangements as every other small
nation and region in Europe?

Mr. Clarke: When I attend the Council of Ministers in Europe, I do
not sit down with representatives of Catalonia, Galicia and so on, whose
people have an identifiable local nationality but are represented by the
Spanish Government. The four countries that comprise the United Kingdom
have a more powerful voice in Europe because they are members of the United
Kingdom. It would be a mistake for any part of the United Kingdom to start
equating itself with Catalonia and thinking that we would be able to play
the same part in European politics as we do at the moment--or as we could
at the moment.

Mr. Jenkin: Are not the major transfers between the different
regions of the United Kingdom necessary to

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maintain the economic cohesion of the
United Kingdom under the single currency of the United Kingdom, the pound
sterling? Would not, equally, huge transfers be required to maintain a
single currency across the European Union? Does not that vindicate the
Government's scepticism about a single currency?

Mr. Clarke: We opted to have a straightforward choice on a single
currency, which we shall exercise if and when the proposal is put to us.
Meanwhile, it makes obvious sense to take part in the preparations for
economic and monetary union so that we can make a better informed choice
when we have a sensible debate on it. It is not inextricably linked to
political union. I recall that political union between Scotland and England
occurred many years before monetary union. Rather than relating it to
Scotland, we should consider the case for and against economic and monetary
union on its merits.

Home Owners (Benefit Entitlement)

2. Mr. Hoyle: To ask the Chancellor of the Exchequer what assessment
he has made of the impact that the restriction of benefit entitlement on
home owners who become unemployed will have on the housing market.

The Financial Secretary to the Treasury (Sir George Young): The
growth of private insurance should reduce repossessions and improve the
stability of home ownership. At present, two thirds of home owners would
not qualify for help if they lost their jobs and many of the remaining
third would be disqualified by receiving redundancy pay or an early
retirement package. Our proposals aim to encourage home owners to insure
against those risks.

Mr. Hoyle: Does the Minister not realise that the folly of his
Department in cutting support for home owners will lead to mortgage lenders
seeking more repossessions and to more homeless people? Whatever happened
to the Tory promise of creating a property-owning democracy?

Sir George Young: I do not accept the hon. Gentleman's premise. As
he knows, repossessions have already fallen by some 36 per cent. and we
hope that that trend will continue. It makes sense to try to remove an
obligation of about £1 billion on the social security budget and
reposition it through the insurance market on those who benefit--home
owners. That will lead to a more stable system, which will cover more
people than the current system.

Mrs. Peacock: Will my right hon. Friend confirm that about 40 per
cent. of borrowers take out insurance and that, traditionally, it was
always accepted that any borrower should? Will he please encourage the
other 60 per cent. of borrowers to do the same?

Sir George Young: My hon. Friend makes a valid point. The 40 per
cent. of new borrowers are paying not only for themselves, but, through the
taxation system, for the other 60 per cent. It would be fairer if we moved
from a taxpayers' subsidy to an insurance-based system.

Ms Primarolo: Why should someone who loses their job face losing
their home too because of the Government's planned changes to the benefits
system? Will not the £18 million saved by the Government in the first
year increase the mortgage payments of every new

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home owner by £20 per month? Since
mortgages are already rising, why do not the Government withdraw that
proposal and help home owners, not undermine them?

Sir George Young: The figure of £20 per month, to which the
hon. Lady referred, or the figure of £12 to which my right hon. Friend
the Secretary of State for Social Security referred in last week's debate,
must be put in the context of a reduction of £140 per month in the
cost of an average mortgage since 1990. Against that background, the figure
mentioned is not a high imposition.

Mr. David Martin: Does it not stick in my right hon. Friend's craw,
as it does in mine, that Labour Members have been posing as the champions
of home owners, when all their policies, in and out of government, have
been not only discouraging but positively hostile to the interests of home
owners?

Sir George Young: My hon. Friend is absolutely right. If Labour
Members felt so strongly about these measures, they would have given an
obligation to repeal them, but of course they have not done so.

Disabled People (Access)

3. Mr. Barnes: To ask the Chancellor of the Exchequer if he will
consider the introduction of tax relief to small businesses for the
purposes of providing access for disabled people.

Sir George Young: Capital expenditure incurred by businesses for
providing access for disabled people may be eligible for tax relief under
normal capital allowance rules. There are specific Government programmes to
assist disabled people such as the access to work programme, which was
introduced in June 1994. This provides a wide range of practical help to
overcome barriers to employment faced by disabled people. For example, the
programme can provide alterations to premises or a work environment and
communicators for people who are deaf. By December 1994, more than 5,000
people had been assisted.

Mr. Barnes: The Minister should realise that civil rights for
disabled people are good for business: they increase sales and the tax take
and they reduce the need for benefits. Therefore, can further measures be
taken to encourage some entrepreneurial zip among small businesses so that
more disabled people can be taken on by them?

Sir George Young: The whole House has much sympathy with the
objectives suggested by the hon. Gentleman. The Disability Discrimination
Bill, which is now before the House, requires an employer to make a
reasonable adjustment to the working conditions or premises where that
could overcome a practical barrier to a disabled potential employee.

Sir Donald Thompson: Does my right hon. Friend agree that, to
achieve that entrepreneurial zip, capital will need to be expended? If the
Government are going to say exactly how that capital should be spent, they
should carefully consider tax benefits for those who are willing to spend
it.

Sir George Young: Depending on the nature of the expenditure, if it
is revenue expenditure, it can all be set

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against tax. Depending on the nature of the
capital expenditure, there may be allowances for that also. In addition,
grants are available under the access to work scheme, through the disabled
person, to pay for some of the adaptations.

Ms Armstrong: Are not the tax issues with which the Minister is
dealing currently dealt with by Inland Revenue tax inspectors? It is
estimated that more than £2 billion of tax is not being collected, so
how does the Minister justify sacking 6,000 tax inspectors? Would it not be
better to have tax collectors collecting tax and not the dole?

Sir George Young: No one is suggesting that 6,000 tax inspectors are
going to be sacked. We have made it quite clear that we hope to achieve our
proposed reductions without compulsory redundancies. In the past three
years, the number of Inland Revenue staff has reduced by 10,000, with only
80 redundancies. That is the progress that we want to make.

Mr. Jacques Arnold: Does my right hon. Friend agree that the
entrepreneurial zip would be taken out of small businesses if local
councils were again given the right to charge the business rate, as
proposed by the hon. Member for Dunfermline, East (Mr. Brown)?

Sir George Young: My hon. Friend is quite right. The uniform
business rate, set by Government with guarantees that it will not rise by
more than the rate of inflation, is a real benefit to small businesses,
particularly to those that were previously confronted with large rate
increases by Labour-controlled local authorities.

Living Standards

4. Mr. Heppell: To ask the Chancellor of the Exchequer if he will
make a statement on prospects for living standards in the coming year.

Mr. Kenneth Clarke: One possible measure of living standards is real
GDP per head. On that basis, my Budget forecast implied a rise of about 3
per cent. over the coming year.

Mr. Heppell: If housing costs are taken into consideration, the real
income of the poorest 10 per cent. of the population has fallen 17 per
cent. since 1979, whereas the income of the richest 10 per cent. has
increased by 62 per cent. What does the Chancellor propose to do about the
growing gap between rich and poor, which is the largest gap since records
began?

Mr. Clarke: The figures that the hon. Gentleman quoted are the most
misused figures in public debate. Close analysis of figures on the so-
called lower 10 per cent. shows that they are not the poorest in society
and that they include many people who declare no income but who are high
spenders. The comparison that the hon. Gentleman makes is, with the
greatest respect, practically valueless. Next year, as a result of strong
and sustained growth and our powerful performance in export markets, we
expect average personal disposable incomes per family to rise by about
£5. Low-earning families will benefit in particular from what I
announced on family credit, which is now being taken up. The welcome fall
in unemployment, which is half a million below its peak already, will also
benefit less well-off people. The figures

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quoted by the hon. Gentleman are
misleading, and the present position is encouraging for people on all
levels of income.

Mr. Patrick Thompson: Bearing in mind the fact that since 1979
living standards under this Conservative Government have risen right across
the board, will my right hon. and learned Friend have talks with my right
hon. Friend the Secretary of State for Social Security on the possibility
of itemising the compensation for VAT on fuel on the pension book, so that
pensioners may fully understand the help that the Government have given?

Mr. Clarke: My hon. Friend is quite right. Living standards
generally are almost half as high again as they were when the Government
first came to power. His suggestion about itemising the compensation
received inside the pension book is interesting and worth while, and my
right hon. Friend may consider it.

It is certain that the amounts added to the retirement pension, over and
above the ordinary uprating, will more or less compensate the average
pensioner for the extra VAT on fuel, which, at the rate at which we have
left it, will now be paid only by those of working age who are not
receiving means-tested benefits in full.

Mr. Gordon Brown: Does not today's interest rate rise represent a
double blow to living standards, making an already insecure Britain even
more insecure: first, because every time we expand--even out of recession--
we cannot sustain that growth, reflecting the underlying economic
weaknesses which the Chancellor refuses to address; and, secondly, because
with the cost for a typical home owner rising by £800 this year--a 25
per cent. rise--millions of people will see a fall in their living
standards? Are not the Government guilty of a betrayal of their promises to
every home owner in Britain, just as they are guilty of a betrayal of their
promises to every taxpayer in Britain?

Mr. Clarke: Last year, we had 4 per cent. growth and the lowest
inflation since the war, which had beneficial effects on the economy and
greatly reduced unemployment by half a million. The key thing, delivery of
which would be beyond the hon. Gentleman and his party, is to keep the
recovery at a sustainable level, to keep inflation down and to keep our
competitive position, which is enabling us to do so well in export markets.
The hon. Gentleman shows that he has learnt nothing from the history of
past Labour Governments, or indeed of any other Government. He would throw
it all away, lose our present competitive position, take risks with
inflation and put us back in difficulties again.

Growth Prospects

5. Mr. Thurnham: To ask the Chancellor of the Exchequer what
representations he has received about future growth prospects for the
United Kingdom economy.

Mr. Kenneth Clarke: I receive a large number of representations
about prospects for the economy.

Mr. Thurnham: Does my right hon. and learned Friend welcome this
week's survey by chambers of commerce throughout Europe, showing that
Britain has the best job prospects of any country in Europe? Does not

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that prove the folly of the trade union-
sponsored Opposition policies, which call for the implementation of the
social charter in this country?

Mr. Clarke: I wholly agree. Last year, we achieved a big fall in
unemployment, and the labour force survey showed a big increase in the
number of jobs--particularly, I am glad to say, in full-time jobs--in the
British economy. We have a far better record than has been achieved
anywhere else in the EU. One reason for that is the firm monetary policy
and strong fiscal policy of the Government, and a second reason is that we
do not put unnecessary burdens and costs such as the social chapter on to
employment, and we have no intention of doing so. That would damage our job
-creating record.

Mr. Radice: Will the Chancellor tell the House why he has put up
interest rates, as he has not said so?

Mr. Clarke: To deliver my stated objective of sustained growth with
low inflation. We still have a buoyant economy, and surveys show that price
expectations are still there. There has been a big increase in commodity
prices, and producer prices are rising a little. I judged it timely to make
a further increase today to ensure that growth is sustained without the
recurrence of inflation. I am not sure what the Labour party would do--it
seems to say the same old stuff when it comments on the issue--but I
strongly suspect that, at a crucial stage of the recovery, it would throw
it all away by not taking the necessary steps to protect us against a
recurrence of inflation.

Mr. Mark Robinson: My right hon. and learned Friend probably knows
that I have not been the greatest fan of Treasury forecasting, but will he
comment on the forecasts of the hon. Member for Dunfermline, East (Mr.
Brown), who said in the debate on the autumn statement in 1992 that the
balance of payments would worsen-- [Interruption.]

Mr. Robinson: During consideration of my right hon. and learned
Friend's ministerial responsibilities, will he examine the forecasting of
the hon. Member for Dunfermline, East, who said in the 1992 autumn
statement debate that the balance of payments would worsen and unemployment
would rise and that the economy was generally on a downhill trend?

Mr. Clarke: In carrying out my ministerial responsibilities it is
important that I maintain a healthy scepticism for forecasts of all types.
I readily acknowledge that the hon. Member for Dunfermline, East (Mr.
Brown) has a history of disastrous forecasts. I forecast that if he were in
my position, he would have voted against all my tax increases and public
spending controls, he would not have raised interest rates and this country
would still be an industrial disaster. He still carps about the remarkable
performance that we achieved in 1994 by ignoring his advice and forecasts.

Mr. Malcolm Bruce: Does the Chancellor accept that raising interest
rates every six weeks does not constitute an economic strategy? Does he
further accept that Britain needs investment? In the light of last week's
CBI survey

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showing that investment is at an all-time
low, does he accept that interest rates are likely further to depress
investment in the economy, which will undermine our growth prospects?

Mr. Clarke: I realise that a Liberal Democrat Government would never
put up interest rates, but would put them down every now and again. In the
real world, however, investment depends on people's confidence that the
Government will deliver sustained growth with low inflation. The fact that
people are in no doubt about our determination to deliver low inflation
will make them confident that they can get the return that they require on
investment if they make it now.

Home Ownership

6. Mr. Nicholas Winterton: To ask the Chancellor of the Exchequer if
he will identify those proposals in his latest unified budget which are
intended specifically to promote home ownership.

The Minister of State, Treasury (Mr. Anthony Nelson): My right hon.
and learned Friend's most recent Budget included measures to double grants
to help council tenants buy homes and Housing Corporation programmes, worth
£208 million, to extend home ownership.

Mr. Winterton: I am grateful to my hon. Friend for that response and
I recognise the basic strength of our economy, but does he accept, however,
that for many decades it has been Conservative party policy to encourage
home ownership? Does he accept that recent Budgets have provided a
disincentive to home ownership and that the housebuilding sector of our
economy is critical to our economic success, as so many other sectors of
manufacturing depend on it? Does he also accept--I say this with some
regret--that the latest interest rate rise is thoroughly undesirable and
will thoroughly depress the building sector?

Mr. Nelson: Let me assure my hon. Friend that the Government remain
firmly committed to home ownership, which, since we took office, has
increased by 4.3 million to 15.6 million. On the interest rate increase,
there can be no doubt that the health and prospects of the housing and
construction markets rely on a period of sustained low inflationary growth.
It is my right hon. and learned Friend's judgment that that is most likely
to be achieved if we continue to bear down on inflation. We have no
interest in setting interest rates higher than is necessary to achieve that
objective.

Mr. Tony Banks: Is not one of the great problems with our economy
the fact that so much future prosperity is based on property prices?

Mr. Nelson: It is a wholly natural instinct and a desirable
objective for many people to build up a financial interest in their home--
to be reliant on that asset, to enjoy it and to be responsible for
ownership. That is what this party has always supported when in government
and we shall continue to do so. The changes introduced in successive
Budgets, to mortgage interest relief or other areas, should not damage the
long-term prospects for home ownership. The figures demonstrate that that
has increased and the prospects for it being maintained lie in a gentle
revival of that market, which today's action on interest rates should
sustain rather than undermine.

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Bank Rates

7. Mrs. Ann Winterton: To ask the Chancellor of the Exchequer when
he will next discuss with the Governor of the Bank of England the level of
bank rates.

10. Mr. Foulkes: To ask the Chancellor of the Exchequer what factors
are taken into account when decisions are made regarding bank rate changes
during his discussions with the Bank of England.

Mr. Clarke: I held one of my regular meetings with the Governor of
the Bank of England to discuss monetary developments this morning. The
factors that I take into account in decisions on monetary policy are set
out in the medium-term financial strategy, and the minutes of my monthly
meetings are now published.

Mrs. Winterton: In his discussions with the Governor of the Bank of
England earlier today, did my right hon. and learned Friend say that moves
towards a single currency in Europe are anathema, not least because of our
bitter experience of the exchange rate mechanism, when bank rates were at
an unsustainable and intolerably high level, afflicting both business and
home owners alike?

Mr. Clarke: I will not argue history with my hon. Friend, because
inflation and interest rate increases began well before we joined the ERM.
While we were in the ERM, we began the steady and sensible process of
reducing both interest rates and inflation. I commend to my hon. Friend the
speech by the Governor of the Bank of England recently on the subject of
economic and monetary union. I have been urging for some time that we have
a more sensible debate in this country on whether economic and monetary
union might be of advantage to this country. I was delighted that the
Governor of the Bank of England decided to participate in that debate. He
was good enough to show me a copy of his speech before delivering it. It is
excellent and I commend it to all those with a serious interest in the
subject.

Mr. Foulkes: Does the Chancellor realise that his cosy te te-a-te
tes over the past five months with the Governor of the Bank of England have
resulted in an increase of £45 a month in the average mortgage? How
does he expect the ordinary wage earner--not Sir Iain Vallance or Cedric
Brown but the people whom they employ--to pay the extra that he has
imposed?

Mr. Clarke: I am sometimes accused of having cosy te te-a-te tes
with the Governor of the Bank of England and, at other times, unavailing
struggles against him in our titanic clashes. [Interruption.] This
country is simply not ready for open government. The minutes of the
meetings that we publish show that we are both firmly agreed on delivering
sustained growth with low inflation. As a leader in The Times recently
acknowledged, by doing that last year we succeeded in producing the
strongest economy in Europe and arguably the healthiest economy in the
developed world. Mortgage costs are now far higher--lower--
[Interruption.] Mortgage costs are far lower than they were in 1990
when they last reached their peak. If I took the advice of Opposition
Members and lost control of inflation, mortgage costs would rise to great
heights.

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When inflation and taxation are taken into
account, the average person's living standards are expected to rise in
1995.

Mr. Yeo: Will my right hon. and learned Friend ignore the mindless
chants from Opposition Members, whose thinking on interest rates has not
advanced from the point of saying that they should be 1 per cent. below
whatever level they happen to be? Does he agree that it is in the long-term
interest of all borrowers, both corporate and personal, that interest rates
increase from time to time, as that helps to achieve the long-term
inflation objectives that he has set out?

Mr. Clarke: I am grateful to my hon. Friend. I am afraid that he
accurately describes the level of discussion with the Opposition that we
usually have on interest rates. The key judgment that must be made is how
to sustain this recovery. That involves taking the necessary decisions to
ensure that inflation does not get back into the system. Small business
men, house purchasers, and people in the real industrial economy, whose
interests are at the forefront of my mind, would suffer most if I lost
control of inflation at a time when our recovery is doing so well. This
recovery will last. We shall not return to boom and bust, and that involves
ignoring the flippant advice of the Labour and Liberal parties on how to
set interest rates.

Mr. John D. Taylor: Would it be wise Government policy to continue
increasing interest rates in advance of a general election?

Mr. Clarke: I have already given one description of the usual
political debate on interest rates. I have deliberately made monetary
policy more transparent to try to stop interest rates being treated as such
a knock-about political subject. People will stop regarding interest rates
as a knock-about issue and allowing political considerations to intrude
when they see us continuing to deliver the sort of growth rate, falling
unemployment, new job creation, high standards of productivity and high
export volumes that we have so far delivered. If we keep on delivering
those to an election, the views of any of the Opposition parties on
interest rates will be regarded as totally irrelevant.

Mr. Elletson: What effect would there be on interest rates if we
removed spending controls on local authorities and created a new tier of
local bureaucracy with regional councils? Is that not another example of
Labour policy that would cost billions of pounds and destroy jobs?

Mr. Clarke: It certainly would. But as my hon. Friend acknowledged
in passing, it is only one of many policies to come from the Labour party
which would undermine our control of public spending and would lead either
to increased taxation--as the Liberals claim--or to increased borrowing,
which would have a destructive effect on monetary policy. It is the very
combination of sensible control of public spending, tight fiscal policy and
a sensible and consistent monetary policy that has created the financial
conditions that currently make us one of the wealthiest economies in the
industrial world.

Mr. Darling: Can the Chancellor confirm that a typical householder
will pay £800 a year more as a result of today's interest rate rises?
Is not it true that, because of that, before too long, the Chancellor's
political instincts will start to dominate consideration of changes in
interest

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rates and override the advice from the
Governor of the Bank of England in order to placate Conservative Back
Benchers?

Mr. Clarke: First, I do not believe that a half per cent. rise could
produce an £800 a year difference, as the hon. Gentleman said.
Secondly, as far as I am aware, no building society has announced that it
is putting up its rates, although it might--I have no control over that. As
I have already said, next year, taking account of inflation and taxation,
the average family can expect an increase in its personal disposal income
and average earnings should rise by about £5 a week. The overall
living standards of this country are best protected by sensible economic
policies. We can look forward to increasing prosperity and more secure
employment for our people as long as we keep on the successful track that
we mapped out last year.

EC Convergence Criteria

8. Mr. Duncan: To ask the Chancellor of the Exchequer whether the
United Kingdom economy meets the EC convergence criteria; and what is the
corresponding position with the performance of other EC partners.

The Paymaster General (Mr. David Heathcoat-Amory): Ireland and
Luxembourg are currently the only countries which are deemed to meet the
convergence criteria.

Mr. Duncan: I am grateful to my hon. Friend for that answer. Does he
accept that there may well be a moment when various national economies are
roughly in balance, but that later, they might not be? Does my hon. Friend
accept that if, in the meantime, a single currency had been imposed,
business risk and differing conditions would merely have shifted to areas
other than the exchange rate? What, then, are the Government's divergence
criteria?

Mr. Heathcoat-Amory: My hon. Friend makes the good point that the
temporary convergence of the economies of Europe would not provide good
conditions for a single currency because subsequent divergence of economic
performances by the national economies of Europe would create intolerable
strains within that single currency area. That is one of the reasons why
the Government believe that the timetable for monetary union laid down in
the Maastricht treaty is unrealistic. That is also why my right hon. Friend
the Prime Minister ensured that the protocol to the treaty requires a
subsequent Act of Parliament and the consent of the House before the United
Kingdom moves in that direction.

Mr. Andrew Smith: In the light of the answer just given, and now
that the Secretary of State for Employment speaks for the Government in
Davos and elsewhere on such matters and the civil war in the Conservative
party is so damaging to this country that the Chancellor chose to come to
the Dispatch Box earlier and refer, not to the role that this country is
playing in Europe, but to the role that this country "could" play in Europe
--the Chancellor's word--have the Government ruled out the United Kingdom
participating in economic and monetary union by the 1999 deadline in the
Maastricht treaty--yes or no?

Mr. Heathcoat-Amory: We play a full and constructive role in Europe,
but that does not mean that

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we are required to sign up to a single
currency now, as the Opposition parties would. We are quite content to
leave that final decision to a future Parliament. I cannot help but observe
that the Opposition parties which are most keen on a single currency are
the most unlikely ever to deliver the economic criteria which would make
that possible.

Manufacturing Industry (Investment)

9. Mr. Bellingham: To ask the Chancellor of the Exchequer when he
next expects to meet the Governor of the Bank of England to discuss
investment in manufacturing industry.

The Chief Secretary to the Treasury (Mr. Jonathan Aitken): My right
hon. and learned Friend the Chancellor regularly meets the Governor of the
Bank of England to discuss the prospects for inflation and the current
state of the economy, including developments in manufacturing investment.

Mr. Bellingham: Is the Chief Secretary aware that business
investment is forecast to grow by a staggering 11 per cent. this year? Is
not that a complete vindication of the Government's economic policies? Is
he further aware that throughout the past year the Labour party have
consistently attacked the Government about the lack of investment in
manufacturing industry? In light of those figures, should not the shadow
Chancellor eat his words, admit that he was wrong and congratulate the
Government?

Mr. Aitken: I would certainly share my hon. Friend's relish in
seeing the shadow Chancellor eat his words, but the meal would be so
gargantuan that I do not think that it is a very likely outcome. My hon.
Friend is correct to refer to the fact that the Confederation of British
Industry has forecast that manufacturing investment will rise by 11 per
cent in 1995. The manufacturing sector in this country is buoyant and in a
strong competitive position. In the three months to November, output was up
by 5 per cent., productivity was up by more than 6 per cent. and unit wage
costs were down by more than 1 per cent. That is a record of success of
which the Government and the country can be proud.

Mr. Sheerman: If the manufacturing sector is to be truly successful
in this country and win back home markets as opposed to export markets, is
not it about time that the Chancellor and the Bank of England encouraged
our financial institutions to think about long-term investment in British
manufacturing capacity, rather than engaging in short-termism?

Mr. Aitken: I am sorry that, judging from the tone of the hon.
Gentleman's question, he does not acknowledge the tremendous success story
of British manufacturing industry in export markets. It has been faring
extraordinarily well. His charge of "short-termism" is unfair. Anyone who
has ever run a business will know that at this point in the economic cycle
it is normal for companies to restructure their balance sheets and build up
their profits. Investment is expected to improve at the turn of the cycle,
and that is why the CBI is forecasting an 11 per cent. increase in
manufacturing investment.